Rapid Shift

Building and rebuilding efficiently and for resilience

Getting cities right can yield major dividends. For instance, research has shown that investing in compact, connected, and efficient cities could substantially reduce greenhouse gas emissions by 3.7 Gt CO2 per year by 2030 and generate savings of as much as US$17 trillion by 2050. But many national governments fail to recognize the importance of investing in sustainable urban infrastructure, continuing to incentivize cars and coal rather than public transport and renewable energy.

Energy storage is cost-effective for many applications and is trending downward in price. Costs have come down 70 percent from 2010 to 2016, and the trend is expected to continue with another 50 percent reduction projected by 2020. As a result, even at today’s prices, combining a renewable energy system with batteries can be less expensive than many fossil fuel alternatives, while providing numerous other benefits including reduced carbon emissions, resilience to fuel-supply or grid disruptions, and reduction in exposure to fuel price risk.

And although microgrids—smaller-scale community systems that are typically connected to the grid but can disconnect safely and continue operating when the grid goes down—can be more expensive, they often provide significant additional value. By avoiding resilience-related costs in other areas of the grid, microgrids can cost-effectively improve grid resilience to outages.

And finally, energy efficiency is the largest and most cost-effective energy resource. Investing in energy efficiency programs and technologies allows utilities to avoid the need to build conventional, supply-side alternatives to generate and deliver power. In fact, average total resource costs for energy efficiency programs across the United States are less than $0.05/kWh, significantly lower than Puerto Rico’s existing marginal generation costs.

Myth: New Technologies are Neither Resilient Nor Reliable In reality, a growing number of demonstration projects have shown that renewables can support a reliable grid. The U.S. Department of Energy (DOE) 2012 Renewables Electricity Future Study found that up to 80 percent of U.S. electricity could be provided by renewable energy resources with no impact on reliability, and other more recent and detailed DOE studies have similarly shown a reliable grid with high levels of renewable energy. This has been practically demonstrated in Hawaii: the islands of Oahu, Maui, and Hawaii currently achieve 11 percent, 25 percent, and 40 percent renewable energy respectively, with reliability much higher than Puerto Rico’s primarily oil-based grid.

Renewable energy and storage can also improve grid resilience. The 2017 hurricanes demonstrated that while the transmission and distribution networks in Puerto Rico and other Caribbean islands lacked resilience, the renewable energy generators were actually generally durable. In Puerto Rico, 90 percent of utility-scale solar photovoltaic and wind capacity on the island is operating or ready to operate, with only two utility-scale renewable energy sites damaged. Approximately 75–95 percent of residential solar systems across the island remained physically intact, with even rarer damage to power inverters.

There are net benefits in the long term from deploying new technologies even after restoration is complete. In addition to being resilient to disruption of the island-wide grid, distributed energy resources can provide low-cost power (e.g., the long-term price of new renewable projects is less than the operating cost of existing generation assets) and reliability (e.g., microgrids and energy storage can provide firm capacity and/or peak-shaving services to the island’s main grid).

What’s Next?

While the Puerto Rico Electric Power Authority (PREPA)—the island’s monopoly electric utility and the largest public power agency in the United States—and the U.S. Army Corps of Engineers (USACE) lead the reconstruction efforts and currently estimate it may take more months to provide power to the entire island and perhaps several years to rebuild the entire grid to pre-storm conditions, there is now a considerable opportunity to rebuild the electrical grid to be more sustainable, cost-effective, and resilient to future extreme weather conditions.

In the last five years, the technological capability and economics of deployed new energy technologies such as utility-scale, distributed, and community-scale renewable energy; microgrids; energy storage; and demand flexibility have rapidly improved, and have been deployed and tested at scale across the world. At their current level of maturity, these technologies can play a crucial role in Puerto Rico’s short- and long-term energy future, capable of supporting a better electricity system for Puerto Ricans. What is needed is a coordinated effort by the Puerto Rico government, regulatory commission, and utility to catalogue, prioritize, and competitively procure potential renewable and distributed energy projects in order to ensure that the best opportunities are fast-tracked, while supporting the least cost and highest value in the long run.

Download The Role of Renewable and Distributed Energy in a Resilient and Cost-Effective Energy Future for Puerto Rico insight brief here.

Rebuilding America and the “New Normal” of Resilience

This year’s hurricane season is the most expensive on record, with $202.6 billion in damages according to Bloomberg. These storms across the Atlantic had devastating impacts on people’s lives and homes, on communities, and on infrastructure in the hardest-hit areas.

The summer’s events have reinforced the importance of resilience for cities and states across the country. For Florida and Texas, improved resilience is at the core of rebuilding efforts. For others, it has become an elevated priority for new construction and infrastructure investment. But for all, the “new normal” caused by changing weather patterns associated with climate change means more frequent, stronger storms and other natural disasters, and that means that resilience in the face of disaster is important as never before.

Whether resilience efforts are reactive or proactive, tools exist for cities to take a holistic approach to resilience in the buildings sector that can yield higher-performing buildings (in both existing buildings and new construction), healthier economies, and better communities that emit less carbon and lessen future impacts on climate change.

Near-Term: Opportunities in Florida and Texas to Rebuild the Residential Sector

One such tool is Property Assessed Clean Energy (PACE) financing. PACE allows the incremental cost of energy-efficient and hurricane-resilient reconstruction to be covered through financing secured by a special incremental property tax assessment. The ongoing savings to the owner—whose energy bill would be negligible—more than covers the payments due under the PACE financing.

We believe PACE can help Florida rebuild a more resilient real estate market while providing a boost to the local job market at no up-front cost, and Florida needs it. Florida has usually had a booming real estate market. More than 500,000 single-family homes and 100,000 rental units have been built in the Miami area itself since 2000. But there has frequently been destruction as well as creation in Florida’s building sector. Just last year, Hurricane Matthew caused $2.7 billion in damage in Florida and $15 billion overall. This year, Hurricane Irma hurt even more Florida homeowners. Federal Emergency Management Agency Administrator Brock Long said preliminary estimates suggested that 25 percent of the homes in the Florida Keys were destroyed by Irma and 65 percent sustained major damage. “Basically, every house in the Keys was impacted,” he said.

While homes in the Keys sustained severe damage this time, many thousands of other homes in Florida continue to be at risk. According to a recent CoreLogic report, the South Florida’s tri-county region around Miami has 784,773 homes at risk from storm surge, more than any other region in the nation. In total, these homes have a reconstruction cost value (RCV) of $143.5 billion. (Threatened areas of New York Cityhave a higher RCV at $264.3 billion, but fewer homes at risk.) When a hurricane next makes landfall directly over the tri-county area, resilience added with PACE financing could help save much of that value.

Meanwhile, in Texas, Hurricane Harvey compounded a heavy demand for housing. Texas had been on pace for 30,000 housing starts in 2017. Now, an estimated 200,000 more homes also need to be repaired or rebuilt. According to a recent preliminary estimate by Moody’s Analytics, the combined destruction from hurricanes Harvey and Irma could range from $150 billion to $200 billion. Texas hasn’t seen its last hurricane either, and PACE financing could help to finance more resilient reconstruction there, too.

Florida passed PACE-enabling legislation in 2010 and five programs are operating in the state—all offer commercial financing, and two offer residential financing. In addition to covering energy efficiency and renewable energy improvements, many Florida PACE programs finance hurricane protection improvements. There are active R-PACE (residential PACE) programs in 16 Florida counties, nine of which are among the counties where FEMA has made residents eligible for individual assistance. Most of the homes in these counties were affected severely by Irma. As of November 2017, 144,407 applications have been approved for assistance within Florida and FEMA has awarded insurance payments to individuals and households to the tune of $124 million. These funds should be used to rebuild for resilience, and PACE financing can augment and multiply the resilience that insurance payments can secure.

It’s Not Just Texas and Florida in Need of Resilience

On the heels of these terrifying recent proofs that large-scale natural disasters can and do occur in the U.S. comes a worrisome new report by Attom Data Solutions. The report finds that the parts of the U.S. most at risk of natural disasters are also the places where property values are highest and increasing most quickly. In fact, the riskiest 20 percent of U.S. counties are economic powerhouses, have the most homes with the highest average home values, and have experienced the greatest price appreciation in recent years. Having so much value locked up in property that is not resilient and is in the path of disaster is disturbing and unsustainable. Figure 1 comes from Attom Data Solutions’ natural hazard index, which matches geographic areas to government data on the risks of flood, earthquake, tornado, wildfire, hurricane, and hail.

Figure 1

PACE Financing Must Be Extended to All States and to New Construction

PACE is an important tool for increasing resilience to natural disasters, and the need for that is dire and widespread. Even so, many states still don’t allow for PACE financing. What’s more, some states have limited the use of PACE to retrofits and reconstruction by making it ineligible for new residential construction.

If this were to change, state governments could catalyze billions of dollars in private-sector investments for building new high-performing and resilient real-estate infrastructure for homeowners across the U.S. With PACE financing, these homes could be built to not only be resilient to hurricanes, earthquakes, and flooding but also to be resilient to grid failures and to provide superior comfort and energy performance, especially if they are built to net-zero energy (NZE), or net-zero ready standards.

In a recently published Insight Brief, RMI proposed leveraging R-PACE for existing and new construction to help scale net-zero energy homes, which can transform the entire country’s real estate landscape. According to RMI’s research, NZE homes are far more energy resilient, built to a higher-quality standard, and higher performing than standard homes and only, on average, $24,811 more expensive than average new homes in the U.S.—before accounting for tax credits and other state/local rebates. This up-front incremental cost could be funded through R-PACE, freeing homeowners and builders of the burden of that cost. Moreover, even after paying for their R-PACE assessments, homeowners stand to gain an average of $160 every year on their high-performing home, according to RMI analysis. This proposition is a win-win solution not only for policymakers, builders, and homeowners, but also for the real estate community at large.

Scaling NZE homes across the U.S. presents an incremental market opportunity of $33 billion by 2037 that will help make our homes and our cities smarter, efficient, and more resilient—helping us build a new America. Along with instituting robust state-level consumer protection measures, leading states and cities have an opportunity to invest in scaling NZE development by enabling R-PACE for new construction.

Long-Term: Improving Resilience in the Buildings Sector and Beyond

RMI believes that R-PACE for NZE construction can be a powerful tool to rebuild, but it is merely one tool in what should be a robust set of strategies and programs focused on high-performance buildings as a means to mitigate climate risk and improve long-term resilience. PACE financing is regulated at the state level, but many of the most promising resilience opportunities can be tackled at the city level, too.

Fortunately, there is growing city leadership across the U.S. to address climate risk and opportunity head-on in the buildings sector and beyond. Many cities are putting in place solutions such as distributed energy—especially solar and battery storage sited on distribution grids—that provide resilience to their electric grids, for instance. And today, there are more tools available than ever before to share best practices, programs, and ideas that have worked for others.

Additionally, the Carbon-Free City Handbook, also released at COP23, is another resource developed by RMI to help cities implement climate policies and actions that place their communities on a path toward sustainable, low-carbon economies. For many cities, buildings are the largest cause of carbon emissions. That’s why five of the 22 recommendations in the handbook are focused on transitioning buildings toward net-zero energy while making those buildings healthier, more comfortable, and more resilient—all while creating an economic boon for the city.

We Need to Act Now

Overall, city leaders recognize the need to address resilience but, at this point, action is far more important than continued planning. Entire economies and people’s well-being—their homes, their health, their jobs, and their families—depend on it.

City leaders interested in working with RMI to implement some of the programs or policies listed above can contact our team.

And, for community members concerned about the resilience of your city, you can take action by sharing the Carbon-Free City Handbook and other resources that can drive forward local efforts to build better communities that improve our climate future, rather than erode it.

New Urban Leadership Council Aims to Make Economic Case for Better Cities

BONN, 12 November 2017: The Coalition for Urban Transitions launched its Urban Leadership Council in an announcement by C40 Executive Director Mark Watts at the high-level Climate Summit of Local and Regional Leaders at COP23 in Bonn, Germany. The Council draws from the world’s most prominent urban, development, and climate focused organizations, networks, and institutions to help unlock the full potential of cities to deliver on the climate, development and growth agendas.

Getting cities right can yield major dividends. For instance, research has shown that investing in compact, connected, and efficient cities could substantially reduce greenhouse gas emissions by 3.7 Gt CO2 per year by 2030 and generate savings of as much as US$17 trillion by 2050. But many national governments fail to recognize the importance of investing in sustainable urban infrastructure, continuing to incentivize cars and coal rather than public transport and renewable energy.

‘Cities are on the frontline of delivering on climate action, global development and economic growth.’ said Mark Watts during the launch. ‘Many mayors are already demonstrating leadership on these fronts but to really unlock the full potential of cities, we also need to coordinate efforts at the national level.’

The Council aims to drive the global effort to unleash the full potential of cities: unlocking those trillions and driving strong climate action. It will do so by supporting national-level decisions on urban development in countries around the world, linking city-level strategies with broader national economic planning.

Its members include Sheela Patel, Chair of Slum/Shack Dwellers International, Gino van Begin, Secretary-General of ICLEI, and Wael Hmaidan, Executive Director of Climate Action Network International among others.

‘The battle for a sustainable future will be won or lost in the world’s cities. Yet only one-fifth of countries have urban strategies. We need much better coordination between city and national governments, agreement on how to fund them at a large scale and more capacity to get the job done,’ says Andrew Steer, President and CEO of World Resources Institute, ‘The Urban Leadership Council will be an invaluable asset in supporting national and city governments to work together, hand in hand, to get cities right and to achieve overall national economic, social, and environmental goals.’

The first Urban Leadership Council meeting will be held on Tuesday 14 November in Bonn.

-ENDS-

Notes to Editors:

The Coalition for Urban Transitions, jointly led by C40 Cities Climate Leadership Group (C40) and the WRI Ross Center for Sustainable Cities in partnership with the New Climate Economy, is the first major international initiative to make the economic case for better urban development globally.

The Coalition’s goal is to support national decision makers to unlock the power of cities for enhanced national economic, social, and environmental performance, including reducing the risk of climate change. The Coalition advances its efforts through an ambitious programme focused on 5 key areas: policies, finance, economics, mobility, and energy.

The Coalition is comprised of over 20 partners, including WRI, C40, Stockholm Environment Institute, The International Institute for Environment and Development, The Centre for Climate Change Economics and Policy (at the University of Leeds), LSE Cities (at the London School of Economics and Political Science), PWC, Siemens, the Overseas Development Institute, the Indian Council for Research on International Economic Relations, Tsinghua University, the African Centre for Cities, McKinsey Centre for Business and Environment, the OECD, the Urban Land Institute, Climate Policy Initiative, the Ethiopian Development Research Institute, Economic Policy Research Centre (Uganda), and the Global Green Growth Institute among others.